9 fund raising hacks for new entrepreneurs
Editor's Note: We recently ran a story of Raghava KK , a New York-based artist turned entrepreneur, who shared his journey of raising $ 2 milloin for Flipsicle app in seed capital without power point slides. Today, he shared his fund raising thumb rules for other entrepreneurs.
No investor will take anybody seriously who says, ‘I’ll quit my job when I raise money’.
Do not hedge. If you are doing this as a side business, no one wants you in the ecosystem. If you are an entrepreneur, you have to take risks. You are all in or all out. There is nothing in between. No investor will take anybody seriously who says, ‘I’ll quit my job when I raise money’. No, you are the wrong person then. You have to believe in your own bullshit, otherwise you don’t raise money. No hedging.
Never go to a VC or an investor and ask what they will give you.Never!
You should always know exactly what you want.
The difference between raising and not raising money lies in clarity in what you want to do. Never go to a VC or an investor and ask what they will give you. Never! You should always know exactly what you want. “I’d go to a VC/Investor and say you are allowed to put in only between X and Y amount. For example, you can’t put more than $250K. Because I’m only raising this round and I want 10 people in the round. That is how I structured it. So that they know exactly where they fit in the vision. I was raising $2 million, I don’t want more than 10 people or less than 10 people. Maximum 250k, minimum 200k. You have 10 days. These are the terms. I’d never ask them what they would put in me. I’m never confused about how much I want to raise.
Initially when you start a million dollar is so much money.
Raise for 18 month not for 12 months: Never raise money in desperation. Raise money for 18 months, think you’ll always need more. Initially when you start a million dollar is so much money. To do a decent company you need million dollars minimum – if you are doing a tech startup.
Meet visionaries, because you are building a vision.
Do not meet the middle people: When you pitch to VCs, meet the LP & decision makers. Do not waste time with fund managers. They don’t know anything. They are kids out of school and are trying to figure things out. The minute someone sends a fund manager to meet me, I am not willing to talk to him or her but have coffee. Meet visionaries, because you are building a vision. Do not meet excel sheet handlers.
Don’t start from the bottom and go up. Go to the middle, then up and down
The Two, One, Three policy: Go to tier-2 people first. Go to angel investors, get a commitment from them then go to tier 1 investors and say ‘see I’ve got a commitment from xyz’ but I came to you because I want smarter money. Don’t start from the bottom and go up. Go to the middle, then up and down. Most often entrepreneurs make the mistake of going bottom up.
Be very clear who you want money from and who you don’t want money from.
Raise only from smart money: Do not raise from non-smart money. Don’t go to friends and families; go straight to professional angel investors. Be very clear who you want money from and who you don’t want money from. I chose to go to angels instead of VCs. I rejected $3 million funding from institutional investors.
If it takes more than two months you are not going to get the money.
Close your round in two months. In general, make sure you close the round in less than two months. Two months stretch is for scheduling problem, not for decision. Decisions happen fast. Serious investors make a decision in one week. If it takes more than two months you are not going to get the money. If you haven’t convinced them in the first meeting it is unlikely you’ll convince them later.
Never hire second tier people, but only first level. Hire entrepreneurial spirited people.
They invest in team. You need a team to build out your vision. You have to know what you will spend the money on. As much as investors, also meet other entrepreneurs. Ask them how much money did they waste? How many people did they hire? What are the roles they have hired for? How much did that cost in India & in the US? Never hire second tier people, but only first level. Hire entrepreneurial spirited people.
Learn very quickly: If 10 people reject you consecutively, there is a problem, and it is not their problem. The problem is yours. You have to re-think the pitch.